Innovation 101: The Structure Barrier

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‘Innovate or die!’ is the mantra of the moment for large corporations. When it comes to structuring the process of innovation, though, uncertainty cuts through such bold statements. Where do you start with something that’s inherently ‘new’?

Segmenting Innovation

First off, it’s simply not viable to describe innovation in broad terms – it requires segmentation. At its most basic level, initiatives fall into two categories: incremental (improving existing) & breakthrough (creating new). These are entirely different processes and therefore require entirely different methodologies. As described in an HBR article, ‘everything that makes incremental models work is what causes them to unintentionally kill potential breakthroughs’.

If you shackle breakthrough innovation to its less sexy brother, you’re going to run into trouble. Equally, if a corporation focuses relentlessly on one rather than the other, disaster is just around the corner.

Incremental bias killed Nokia and has permanently damaged Microsoft, whilst radical change - seen with the release of the Fire Phone - caused Amazon to take a huge financial blow. Many small and medium sized businesses constantly chance their arm on extreme innovation, only to sink into bankruptcy.

Fear, whether it’s fear of being disrupted or of disrupting an existing business, should offer motivation rather than the focal point of a strategy. Balance is essential.

Top-Down vs. Bottom-Up

Beyond that, structure can be disrupted by the source of innovation. Should a new initiative filter from the top, as with so many other functions? Or should change bubble up from would-be entrepreneurs deep within the organization?

It’s been argued that ‘the higher the goal the higher the role’ – that real breakthrough innovation can only come from the top. After all, it’s something pioneering, needing power and influence for full assimilation. Incremental innovation can come from a number of areas, through the traditional chain-of-command– it’s safer to entrust the smaller projects this way.

Is that really true, though? Initiatives such as Adobe’s ‘Kickbox’ are debunking the myth, showing a structure to support breakthroughs from the bottom-up. In today’s corporate environment, structure for innovation isn’t black-and-white – don’t make the mistake of overlooking the colossal potential of the workforce.

Integrated or External?

Drucker said ‘Innovation is real work, and it can and should be managed like any other corporate function’. His argument was clear – innovation should be its own function.

That sounds ideal, yet in practice it’s not necessarily working. McKinsey reported in 2012 that just 1/3 of executives could say that innovation was fully integrated into their organization’s strategy. Recurring conference themes have suggested that not much has changed in recent years. Alongside C-Suite approval, strategy is essential.

Can an external innovation center, closer to its target market and separated from the main HQ, hope to remain integrated with strategy? Labs and centers have proven significantly more successful than home-based innovation departments. Despite this, they engage less regularly with company leaders, representing a paradox between the importance placed on alignment versus relative freedom of operation.

Certainly, when it comes to breakthrough initiatives, there’s been huge positives from labs and corporate incubators which are separated from the main business. Operating more like startups, they develop new things, faster. Countless organizations, particularly financial, have looked to this model. Perhaps you need to keep the top order out of a new initiative to avoid any baggage and sharpen up the focus on breakthrough innovation.

Incremental innovation is something that should be more integrated. If there are problems with this, they are generally cultural and can be improved, at least, with a number of off-the-shelf ideation and engagement programs, such as Stage Gate & Spigit.

KPIs

New processes and services, simply put, need new metrics; they are new. Incremental innovation, which must be separated, can work to familiar strategic measures, but applying these to new innovations is inadequate. It will cripple them from the start with unrealistic expectations for return.

Rather than linking outcomes to financial goals, it’s finding some measure for success in the value chain of innovation that’s critical. This must not be ignored in favor of attributing everything to dollars and cents.

For corporate innovation to thrive, it needs to be separated, both in terms of what it means, and where it’s done. Whilst it’s not right to say that all organizations should create a breakaway innovation centre, it’s certainly fair to conclude that traditional corporate structures do not suit the process.